Title
Asia United Bank vs. Goodland Co., Inc.
Case
G.R. No. 190231
Decision Date
Dec 8, 2010
Goodland Company repudiated a mortgage, alleging fraud, and filed two cases to nullify it. The Supreme Court ruled it engaged in forum shopping, dismissing the case with prejudice.
mortgage
foreclosure
dispute
A

Case Summary (G.R. No. 190231)

Factual Background

Respondent mortgaged its Laguna properties to AUB on July 21, 1999 to secure SPI’s loans. Respondent’s vice president, Gilbert G. Guy, signed the mortgage contract on respondent’s behalf, and the deed was intended as security for SPI’s obligations. Respondent later asserted that this authority was limited and fraudulent acts were committed. In a January 29, 2002 letter, respondent repudiated the mortgage and accused petitioners of fraud and falsification. Respondent claimed that Guy signed a blank deed of real estate mortgage only on the understanding that respondent would act as a third-party accommodation mortgagor for SPI, without intending to mortgage the Laguna properties as security for SPI’s loans. Respondent asserted that, contrary to this understanding, petitioners filled in the pre-signed blank forms and registered the mortgage.

When petitioners ignored respondent’s demand to release the encumbrance, respondent pursued litigation. Despite the mortgage, SPI failed to pay its loans, and AUB foreclosed on the Laguna properties. The properties were sold at a public auction where the bank was the highest bidder, leading to further legal consequences for respondent’s interest in the properties.

Civil Case No. B-6242: RTC Proceedings and Dismissal

On January 16, 2003, respondent filed Civil Case No. B-6242 in the RTC of Binan, Laguna, Branch 25. The complaint sought to nullify the mortgage over the Laguna properties, essentially reiterating the allegations contained in the January 29, 2002 letter. Respondent’s theory was that the mortgage deed was void because respondent never consented to encumber the Laguna properties as security for SPI’s loans.

Petitioners moved for dismissal. The RTC later dismissed Civil Case No. B-6242 with prejudice by order dated August 16, 2007, on the ground of willful and deliberate forum-shopping. The RTC found that the allegations and reliefs respondent sought in Civil Case No. B-6242 were identical to those in a later-filed case, Civil Case No. B-7110. The RTC also emphasized that respondent did not disclose the filing of Civil Case No. B-7110 in the proceedings of Civil Case No. B-6242, and that respondent failed to comply with the undertaking in the certificate of non-forum shopping. The RTC thus concluded that respondent did not satisfy the requirements of Rule 7, Section 5 of the Rules of Court, and it imposed the sanction of dismissal with prejudice for willful and deliberate forum-shopping. Respondent’s motion for reconsideration was denied on December 5, 2007.

Civil Case No. B-7110: Foreclosure Challenge and Dismissal

While Civil Case No. B-6242 was pending, AUB foreclosed and sold the properties. On November 26, 2006, respondent filed Civil Case No. B-7110 in the same RTC, also seeking relief from the consequences of the mortgage transaction. The complaint requested, among others, preliminary injunctive relief and the annulment of the extrajudicial foreclosure sale and related acts, along with damages, and it prayed for cancellation and issuance of new titles, as well as a writ of possession or injunctive orders. The core ground remained that respondent never agreed to mortgage the Laguna properties, and therefore AUB had no right to foreclose.

On petition of AUB, Civil Case No. B-7110 was dismissed with prejudice by order dated March 15, 2007, based on willful and deliberate forum-shopping. The dismissal of Civil Case No. B-7110 became an important factual and procedural reference point in assessing respondent’s conduct in Civil Case No. B-6242.

Court of Appeals’ Reversal

Respondent appealed the RTC orders dismissing Civil Case No. B-6242, and in a decision dated August 11, 2009, the Court of Appeals granted the appeal. It held that respondent asserted dissimilar rights and sought different reliefs in Civil Case No. B-6242 and Civil Case No. B-7110. The Court of Appeals, in effect, reinstated Civil Case No. B-6242. Petitioners moved for reconsideration, but the Court of Appeals denied the motion in a resolution dated November 10, 2009.

The Parties’ Contentions in the Supreme Court

Petitioners availed of the Supreme Court’s review, arguing that the Court of Appeals erred in reinstating Civil Case No. B-6242. Petitioners maintained that respondent committed willful and deliberate forum-shopping by filing Civil Case No. B-6242 and, while it was pending, later filing Civil Case No. B-7110. They contended that the RTC correctly applied Rule 7, Section 5 and properly dismissed the case with prejudice because respondent concealed the earlier or similar action and failed to comply with the certificate and undertaking against forum-shopping.

Respondent, in turn, urged the appellate position that the two cases involved dissimilar rights and different reliefs, thereby negating the forum-shopping allegation and supporting the Court of Appeals’ reinstatement of Civil Case No. B-6242.

Legal Basis and Reasoning

The Supreme Court began by restating the controlling concepts. It characterized forum shopping as the institution of two or more actions or proceedings grounded on the same cause, under the expectation that one court would render a favorable disposition. It also noted that forum shopping exists when the elements of litis pendentia are present or when a final judgment in one case would amount to res judicata in the other.

In analyzing the pleadings, the Court found that the allegations and the requested outcomes in Civil Case No. B-6242 and Civil Case No. B-7110 were sufficiently similar in their factual foundation and in the relief sought. In Civil Case No. B-6242, respondent sought to nullify the deed of real estate mortgage on the ground that it did not consent to encumber its Laguna properties as security for SPI’s loans. In Civil Case No. B-7110, respondent asserted that AUB had no right to foreclose because respondent never agreed to mortgage the Laguna properties. Although Civil Case No. B-7110 addressed the foreclosure stage, the Court held that the essential controversy in both cases was respondent’s lack of consent to the mortgage and the legal consequences flowing from that alleged defect. Thus, the Court concluded that the two cases were founded on substantially the same operative facts and that respondent’s act of filing Civil Case No. B-7110 while Civil Case No. B-6242 was still pending constituted willful and deliberate forum-shopping.

The Court then focused on the more specific procedural requirement under Rule 7, Section 5. That provision required every litigant to notify the court within five days of learning that a complaint involving the same or similar action or claim had been filed elsewhere. The Court stressed that both cases were raffled to the same RTC, Branch 25. Even so, respondent did not report the filing of Civil Case No. B-7110 in the proceedings of Civil Case No. B-6242. For the Court, this omission established respondent’s furtive intent

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